What do we mean by cost to serve?

We calculate the amount that a company spends to provide a range of goods and services to smallholder farmers.

Let's start from full service costs.

We include operating expenses such as staff costs,

transport and logistics costs,

infrastructure expenses,

and financing expenses.

From this amount, we have excluded Cost of Goods Sold (COGS), for instance, the cost of inputs such as fertilizer.

Then, total annual service costs are normalized by the number of farmers included in service delivery.

Resulting in Cost to Serve, which is expressed as USD per farmer per year.

Once we combine data for all service delivery models on our portfolio...

...we end up with a wide spread of cost to serve

Our main analytical aim is to identify links between drivers and cost to serve, as well as the other outcomes that we look at in this learning event - cost recovery and farmer income uplift.

As an example, let's combine cost to serve with revenues generated - this represents the revenues that the businesses generate by charging farmers for the goods and services provided.

Surprisingly, we found that more costly service delivery is associated with a higher cost recovery as well.

We think that this raises many interesting points to discuss during these 2 days!

Want to know more? Any issues you see with this? Any stories you would like to share with us?

Find us in the Annual Learning Event, or reach out to us at:

Wouter van Monsjou
Mirza Čengić